Liquidated Damages
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Statutes
Damages payable by either party for default, or any other act or omission may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then-anticipated harm caused by the default or other act or omission. Gen. Stat. ยง 25-2A-504
Cases
A provision in a contract liquidating the damages for the breach of the contract is valid if it provides for liquidated damages derived from a "good-faith effort to estimate in advance the actual damage which would probably ensue from the breach." Knutton v. Cofield, 273 N.C. 355, 361 (1968). However, a penalty, a sum fixed, "not as a pre-estimate of probable actual damages, but as a punishment, the threat of which is designed to prevent the breach," will not be enforceable. Id.
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Contributors
Bryon Saintsing, Esq. Tom Gray, Esq.
Smith Debnam Narron Drake Saintsing & Myers, LLP
The statutory information was edited and reviewed with the support of MultiState
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